Chapter 6
Business Markets and Business Buying Behavior
Business Markets
• Business buyer behavior refers to the buying behavior of the organizations
that buy goods and services for use in production of other products and
services that are sold, rented, or supplied to others.
• Business buying process is the process where business buyers determine
which products and services are needed to purchase, and then find, evaluate,
and choose among alternative brands.
Business Markets
Market Structure and Demand
• Fewer but larger buyers.
• E.g. Gore-tex. Selling to textile and sportswear companies. Educating
individual customers but also promoting outdoors brands like The
Northface, Marmot, Nike etc.
Business Markets
Decision Process
• More complex than individual consumer purchases
• More decision participants
• More professional purchasing effort
– Buying committees
• Buyer and seller are more dependent
– E.g. technical assistance in procurement
Business Markets
Decision Process
Supplier development
• Customer companies are practicing systematic development of
networks of supplier-partners to ensure an appropriate and dependable
supply of products and materials that they will use in making their own
products or resell.
• E.g. Walmart’s supplier development department!
Business Buyer Behavior
The Model of Business Buyer Behavior
Marketing Stimuli Buying decision Product / service
Buyer Response
Environment
Buyer
(4Ps) and process takes place choice
Other Stimuli at the buying
center in the buying Supplier Choice
(economic,
technological, organization. Order quantities
political, cultural, Individual, Delivery terms and
competitive) interpersonal and times
organizational
influences exist. Service terms
Payment
Business Buyer Behavior
Major Types of Buying Situations
• Straight rebuy is a routine purchase decision such as reorder without any
modification.
• Modified rebuy is a purchase decision that requires some research where the buyer
wants to modify the product specification, price, terms, or suppliers.
• New task is a purchase decision that requires thorough research such as a new
product.
Business Buyer Behavior
Major Types of Buying Situations
• Systems selling involves the purchase of a packaged solution from a single seller.
– E.g. Product and processing chemicals together from a company. Basell/ BASF
/Sigma??
Business Buyer Behavior
Participants in the Business Buying Process
• Buying center is all of the individuals and units that participate in the business
decision-making process.
• Interpersonal relations are influential!
– E.g. Buying polypropylene granules for a carpet weaving plant. Engineer, top manager,
procurement manager, procurement officer.
Business Buyer Behavior
Participants in the Business Buying Process
• Users are those that will use the product or service. Generally give the buying
proposal.
• Influencers help define specifications and provide information for evaluating
alternatives.
• Buyers have formal authority to select the supplier and arrange terms of purchase.
• Deciders have formal or informal power to select and approvefinal suppliers.
• Gatekeepers control the flow of information.
• Procurement personnel may prevent sales representatives to approach users or
deciders.
Business Buyer Behavior
Participants in the Business Buying Process
• Buying center provides a
major challenge
• Who participates in the
process
– Their relative authority
– What evaluation criteria
each participant uses
– Informal participants
Business Buyer Behavior
Major Influences on Business Buyers
Economic Factors Personal Factors
Price
Emotion
Service
Business Buyer Behavior
Major Influences on Business Buyers – Environmental Factors
Demand for Economic Cost of
product outlook money
Supply of
Technology Culture
Materials
Politics Competition
Business Buyer Behavior
Major Influences on Business Buyers - Organizational
How many people are included in the
buying process?
Objectives
Who are they?
Policies
What are their evaluative criteria?
Procedures What are the company’s policies and
limits on its buyers?
Structures
Interpersonal relations between these
people is another unknown.
Systems
Business Buyer Behavior
Major Influences on Business Buyers – Individual Factors
Motives Perceptions Preferences
Age Income Education
Attitude
towards risk
Business Buyer Behavior
The Buying Process
Business Buyer Behavior
The Buying Process
• Problem recognition occurs when someone in the company recognizes a problem or need
• Internal stimuli
– Need for new product or production equipment
• External stimuli
– Idea from a trade show or advertising
Business Buyer Behavior
The Buying Process
• General need description describes the characteristics and quantity of the needed
item
• Product specification describes the technical criteria and rank the attributes of the
product such as reliability, durability, price, etc.
• Value analysis is an approach to cost reduction where components are studied to
determine if they can be redesigned, standardized, or made with less costly
methods of production
Business Buyer Behavior
The Buying Process
• Supplier search involves compiling a list of qualified suppliers.
• Proposal solicitation is the process of requesting proposals from qualified suppliers.
– Sometimes presentations are made by the supplier.
– Offers presented by the suppliers to the buyer
Business Buyer Behavior
The Buying Process
• Supplier selection is the process when the buying center creates a list of desired
supplier attributes and negotiates with preferred suppliers for favorable terms and
conditions.
• Order-routine specifications is the final order with the chosen supplier and lists all
of the specifications and terms of the purchase.
Business Buyer Behavior
The Buying Process
• Performance review involves a critique of supplier performance to the purchase
terms
Business Buyer Behavior
E-Procurement
• Online purchasing
• Company-buying sites
Institutional and Government Markets
• Institutional markets consist of
hospitals, nursing homes, and
prisons that provide goods and
services to people in their care
• Characteristics
– Low budgets
– “Captive” audience
Institutional and Government Markets
Government Markets
• Tend to favor domestic suppliers and require suppliers to submit bids and normally
award to the lowest bidder
• Affected by environmental factors
• Non-economic factors considered
– Minority suppliers
– Depressed suppliers
– Small businesses
Discussion
• How do business markets differ from consumer markets?
